Britain’s output stutters at 0.2% for the second quarter – down from 0.5% in the previous three months, it’s time for a, look at how the much-vaunted BRICS economies are performing.
Expert analysts have looked at each of the BRICS countries – Brazil, Russia, India and China – and conclude that beneath the hype, only Russia looks a good candidate for investors.
The view of James Smith, manager of the £171 million Ignis International Emerging Markets Select Value Fund is Brazil, India and China all have their market flaws and only Russia is attractive as a candidate for profit taking.
Here’s his view of each market in more detail:
A market with long-term growth potential, but ahead of events with stock prices that are too high
Some stocks in Russia are trading around 7-8 times earnings, which makes them cheap, although they have risen recently due to higher energy prices.
“Russia might be a candidate for profit taking in the coming weeks and months although we will see how the market performs,” suggests Smith.
Indian stocks are expensive and the country faces inflation problems.
“The big question is can India tighten on inflation without hitting its economic growth?” asks Smith.
Many Chinese companies, are overvalued, says Smith, although after the recent fall in the market they are more attractively priced than they have been for some time.
“The market often gets confused between GDP growth and stock market performance and China is a classic case of that. For value investors like us, the sweet spot comes when the prospects for corporate earnings growth look good at the same time that valuations are cheap,” he said.
Smith also looks at some markets they pick up less publicity than the BRICS – he suggests Eastern Europe is performing well, especially Poland, Hungary and the Czech Republic, while further afield, Argentina is a dark horse.
Nearer home, Israel and Egypt are two contenders for investors that are often overlooked.